Gold shines amid weak dollar, crypto selloff
The US dollar has witnessed a massive selloff in recent weeks as the US Federal Reserve signals easing of its hitherto hawkish stance on rate hikes. Stock markets have also rallied, with investors hoping for a gradual return to the easy money regime that has defined equity markets for the last decade.
Friday’s continuing rally on Wall Street, on the back of Thursday’s mega spike, also pushed the dollar to its biggest two-day drop in 13 years.
While the good news on the rate front cheered markets, the cryptocurrency market went into a tizzy as FTX, a major crypto exchange, declared bankruptcy on Friday. Major selloffs have ensued, with some exchanges freezing transactions as well.
This double whammy – from a cheaper dollar and the crypto storm – has once again reignited the appetite for gold. Both as a safe haven shield from the uncertainties of the crypto market and to gain from the cheaper greenback, gold prices rose to a near three-month high on Friday. On Friday, gold closed at $1,765.10, a gain of 0.85 per cent.
“The beneficiary of the US Dollar selloff on Friday and the crypto selloff on Tuesday was gold, as traders parked funds in the safe-haven asset. Gold had been moving lower in an orderly channel since March, after testing the all-time high of 2,075.11 in August 2020. The precious metal pulled back to the 50 per cent retracement level from the lows of August 2018 to the highs of August 2020 near 1617.68. Gold tried to break the support level three separate times since September 28, failing each time. The last time price tested that level was November 3, the day before the US dollar meltdown occurred. Gold is currently up nearly $100 since then and is testing the 100-day moving average at $1,716.21,” according to a research report by Forex.com.
Analysts believe that the metal may face horizontal resistance near $1,735 level. “Above there, gold can move to $1,807.91, the highs of August 25,” the Forex.com report said.
However, there are indications that gold prices may have gone too high too soon. “First support is at Monday’s high of $1,682.13. Below there, the price can fall to the lows of November 3 at $1,616.71, then the top downward sloping trendline of the recent channel near 1590,” the report predicted.
